Nokia 2008 Annual Report Download - page 162

1. Accounting principles (Continued)
Income taxes
Current taxes are based on the results of the Group companies and are calculated according to local
tax rules.
Deferred tax assets and liabilities are determined, using the liability method, for all temporary
differences arising between the tax bases of assets and liabilities and their carrying amounts in the
consolidated financial statements. Deferred tax assets are recognized to the extent that it is probable
that future taxable profit will be available against which the unused tax losses or deductible
temporary differences can be utilized. Deferred tax liabilities are recognized for temporary differences
that arise between the fair value and tax base of identifiable net assets acquired in business
combinations.
The enacted or substantially enacted tax rates as of each balance sheet date that are expected to
apply in the period when the asset is realized or the liability is settled are used in the measurement
of deferred tax assets and liabilities.
Deferred taxes are recognized directly in equity, when temporary differences arise on items that are
not recognized in the profit and loss.
Provisions
Provisions are recognized when the Group has a present legal or constructive obligation as a result of
past events, it is probable that an outflow of resources will be required to settle the obligation and a
reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed,
the reimbursement is recognized as an asset only when the reimbursement is virtually certain. At
each balance sheet date, the Group assesses the adequacy of its preexisting provisions and adjusts
the amounts as necessary based on actual experience and changes in future estimates.
Warranty provisions
The Group provides for the estimated liability to repair or replace products under warranty at the
time revenue is recognized. The provision is an estimate calculated based on historical experience of
the level of repairs and replacements.
Intellectual property rights (IPR) provisions
The Group provides for the estimated future settlements related to asserted and unasserted IPR
infringements based on the probable outcome of potential infringement.
Tax provisions
The Group recognizes a provision for tax contingencies based upon the estimated future settlement
amount at each balance sheet date.
Restructuring provisions
The Group provides for the estimated cost to restructure when a detailed formal plan of restructuring
has been completed and the restructuring plan has been announced.
Other provisions
The Group recognizes the estimated liability for noncancellable purchase commitments for inventory
in excess of forecasted requirements at each balance sheet date.
F18
Notes to the Consolidated Financial Statements (Continued)